9.22.22: Audio automatically transcribed by Sonix

9.22.22: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to your retirement Unbroken with your host. Merritt Strunk Merritt is a licensed fiduciary and financial advisor who always places your needs first. Merritt works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Merritt Strunk.

Merrit Strunk:
Hey, welcome again to the Retirement Unbroken show. This is Merritt Strunk, founder and president of Momentum Financial and Insurance Services and a host of Retirement Unbroken radio show and podcast. Welcome to all the listeners in The Unbroken Nation. I'm joined today by Matt McClure, our producer. Say howdy, Matt.

Producer:
Hello and howdy there, Merritt. How are you?

Merrit Strunk:
I'm doing great. Doing fantastic. But look, we got a lot going on here today. We've got a jam packed show today. So we're going to bring you lots of information that you need to know for your own financial future here. If you're a regular listener here at the Retirement Unbroken Nation, you know, our mission is to transform our listeners into more educated, more equipped and more financially savvy individuals so that you can make better financial decisions for your future. Each episode is tailored and put together to awaken your mind and your spirit and to give you tools and information so that you can act with intention. To do what? To unlock what's possible in your financial future. Okay. So, you know, if you've never been to our website, please go to Unbroken Retirement. Unbroken dot com. And you can see that there are some resources there. You can hit the complimentary consultation button there and you can meet with us. Look, I meet with each and every person that responds. There is no cost or obligation to chat, only if it works best for you. And when you do that, we'll help you to analyze your specific financial situation. We'll look closely at any retirement accounts, investment accounts that you have, find out what fees you are paying, what unnecessary cost you've got, and if you've got some unnecessary risk in there.

Merrit Strunk:
We'll also talk to you about your Social Security and Medicare and we'll be able to tell and compare your current situation with what's possible. Look, we've got a lot going on in the world and the United States today. And if you haven't heard from your financial advisor lately, or perhaps you're your own financial advisor, if you do have a financial adviser, you've got to ask yourself, if I haven't heard from them, why not? So please reach out to us for. Get a second opinion. Ask any questions you want. Just. We want to help you reach your financial freedom. So, you know, the reason why we call this the Retirement Unbroken radio show is that for many people there, their future retirement and their financial situation may already be broken. They just don't know it yet. When do they normally find out that's broken? Well, much later in the life they find out, well, I should have done this or I should have done that. And it's not working out great. That's, my friends, is a drag. Do not do that. And we want to help you unbreak your future retirement. So today on the show today, we're going to be doing a section here. It's called Asking Yourself the right questions, Asking Yourself the Right Questions.

Merrit Strunk:
It helps when you ask yourself the question. And then we're going to talk about what's going on in the financial market today related to inflation and the Fed rate hike that just happened. We're going to tell you all about that, what it means for you. And then we're to talk about five things you can do right now that you need to be thinking about. Okay, so let's get started here. So we've got this new segment here. It's called Asking Yourself the Right Questions. So please listen to this. If you're at home, if you're driving, try to focus here. If you are in your thirties, forties, fifties, and even in your sixties, please ask yourself this question. Is it possible you're saying this to yourself and your brain? You can hear your own voice? Is it possible that without you even knowing it, the decisions you're making now, or in many cases, the decisions you're not making now, insert the word procrastination, right. Is affecting your your future financial outcome. Let me repeat it. Is it possible that without knowing it right now, the decisions you're making or not making is affecting your financial future outcome? I think the answer is, of course. Wouldn't you agree, Matt? Of course.

Producer:
Yeah, absolutely. Yeah. Whether you know it or not, whether you realize it or not, I think the decisions that you have now can have a huge impact on your future.

Merrit Strunk:
Yeah, I agree. And I think the only. The answer to that is of course. Of course, the things I'm doing now or not doing now are going to affect my future financial outcome. So the wealth and assets that you have that you'll have in the future are predicated on what you're doing now. So things I'm either doing or not doing my financial future or my well being for my family and myself is all predicated on what I'm doing right now. So next question. In the future, would you like to have the ability to have many options open to you? Again, here we are in the future. Would you like options in the future? I think the only answer there is another one, which is, of course, I feel like I'm the attorney that asks the questions that only that can only be in the affirmative or I already know the answer to.

Producer:
Pleading the witness, saying leading the witness.

Merrit Strunk:
Or leading the witness. Yes. So here's the deal. Although these seem rather obvious, you know, is it possible that what you're doing now is going to affect your future? Yes. Would you like to have a plethora of choices available to you, options that are available to you in the future, of course. But I think asking those very simple questions and you asking yourself those questions starts the ball rolling. It's a cause set in motion, in essence. So what? I mean, have options open to you, unbroken nation? Listen up. When I'm telling you this, I submit to you that in the future you will either have the ability to go where you want to go, choose where you want to live, do the things you want to do, have the things you want to have, have the ability to be with the people you want to be around, experience the things that you want to experience in the way that you want to do them. And also, here's a very important one. Also, what happens when you choose what happens to you as you get older in life? Where will you be? How will you be taken care of? What options and things will you have access to? So you will either have the ability to have those options and that level of quality that you would desire or you will not.

Merrit Strunk:
You either will or you will not have those options, quality of options. And when you don't have those things, those options available to you, you experience the other side, which is compromises. Compromises, right? Less quality. I've always told my children about, you know, what's the big deal about wealth is that you you have the ability to experience quality, quality, time, quality experiences. You have options available to you. And when you don't have those resources because of the actions or lack of action that you're doing, not doing now, then you don't have those that quality or those options available to you. Not always, but in most cases, a big part of this is your mental mindset. There was an episode we did not that long ago where we said, You know what, your what's your financial personality inside your head? You know, and the mental mindset is one of those components here to know that these things that you would desire are possible for you with the appropriate action. Dreaming and hoping is not going to work it out. It's not going to happen. Action. Right. That's the the other component here is the ability to act, to push past what is comfortable of not doing those things. Right. I want to lose weight. Well, if I don't stop eating the potato chips or not go to the gym, then I can't get there.

Merrit Strunk:
I need to act. You know, you're capable of losing weight. You just have to move your body and watch what goes in your mouth. So the same thing you're capable of growing your wealth and making those decisions, making use of compound interest, any of those things. But you have to act in order to make things happen. So, folks, when it comes to money, hope is not a viable strategy and time has everything to do with it. Sometimes I say the the equation, the mathematical equation of wealth creation is very simple. It's a very simple, simplified one, but it makes sense, which is you have an amount of money that if you invest at a certain rate of return with a certain systematic contribution over a period of time equals wealth, money plus more money over time at a rate of return. More wealth there, right? Or duh, one of the you know, you make the choice or duh. So I liked her. So. So there you go. I submit that you're not if you if you do not do the things you want to do. And this is about asking yourself the right questions. Right. Is it possible that what I'm doing or not doing right now is going to affect my financial future? Yes.

Merrit Strunk:
And I want you to ask yourself that question is very easy, just the realization of it. Why? Because if you're not doing the action that you need to be doing right now, then you need to find out how to do that. And today, if you heard the. Words that might be the cause set in motion. If you want to. Where you go, where you want to go. You want to do the things you want to do. You want to have the quality of life you want to have. It's not going to happen just by hoping. You've got to take action. Part of that's the mental mindset, right, of saying, I can do this and if I act now, I can change it. And folks, I've seen it. I have seen it. People who can very easily turn around that future financial situation with a few very easy things. And because those folks started asking the right questions, having the right phone call, looking at a projection of their retirement income in their future, and now knowing that knowledge is power, now you can do something about it. All right. So let's this brings us to the financial quote of the week. So bring on that wisdom here, Matt. What is that quote.

Producer:
Now of wholesome financial wisdom? It's time for the quote of the week.

Producer:
Yeah. I'm going to bring in some some words of wisdom here. And this week, I think they're very appropriate for the current situation in the economy, and they're the words of Zig Ziglar. He said, quote, Expect the best, prepare for the worst. Capitalize on what comes wisdom.

Merrit Strunk:
Wisdom, right. That's that's some good stuff. And everybody knows that, you know, I hope for the best prepare for the repair of the worst. And I think that really resonates, like you said, really resonated what's going on with us. And that's the perfect quote for today. What? Well, the market in the economy. So last week, the August CPI inflation data came in above estimates, a hair right above. They expected to be lower and it was a hair higher. And that just set everything on fire. This puts additional upward pressure on interest rates and it gives the support to the Federal Reserve in their hawkish position to continue its rate hiking cycle for the remainder of the year. And the Fed's goal, as I think everybody listening would know, is to slow down the economy. Prices are going up. Everything is going up. We've got to slow it down. Wage, wage inflation is going up. We can't find enough people to fill the positions. And that's causing a bit of the inflation situation that we're seeing here. And the Fed's mandate is one of the two part mandates is to address the issue of inflation, and that is what they're doing. So when the CPI number came in and it was higher than what was expected, stocks sold off last week, reversing a four day rally, which was, oh, hopeful, you know, it's a bear market rally. And then we had that big sell off and the selling continued unabated ever since. So they sold off. And so Wednesday, the Federal Open Market Committee, you might hear the acronym of the FOMC, that's Jerome Powell and his pals there who meet.

Merrit Strunk:
They approved the 75 basis points that was expected for the for the lending rate and signaled and this is the big part they signaled that more is to come before the end of the year. So, yes, they hiked it. That's the third hike. And yes, there's more to come in efforts to tamp down the raging economy and price increases. So, like I said, this is the third 75 basis point rate hike in a row. This is unprecedented since the Fed explicitly started targeting Fed funds rate to conduct monetary policy back into the eighties. Right. So unprecedented actions now. So that's why it's rather significant here. So after this announcement, quickly the market reversed its upward progress and then it started whipsawing back and forth. It was down. Then it came back up a little bit, then it started going down again. And it's just just showing the reaction of what's going on here and trying to to find some leadership. So the the major indices like the S&P, the Dow, the Nasdaq. They're mired in a technical bear market with each below their respective 50 and 200 day moving averages. This is pretty much what you look at all the time to see where the where the trend is going. And so the important technical support here of 3900 level for the S&P that's been violated. It's been passed by. So we're below that. And to date, the market appears to have priced in a mild recession like we were expecting, 75 basis points.

Merrit Strunk:
So the market prices in these rate hikes, they've already adjusted very forward looking. So the market is forward looking and has these things in mind already. And we're in the process of re evaluating the possibility of something worse in store, a what could be worse in store, a heavy recession or a long duration recession, not something more shallow. So this is leading to a repricing of risk assets. Risk assets, fancy financial advisor why can't you just be normal language merit. It is just, you know, equity markets, the investments of folks and thus thusly the stock market is declining. So a great quote here from bank rates. Chief financial analyst Greg McBride. He said that the Fed now sees rates going nearly 4.5% by the year end, compared to the median projection of 3.4 in June and just 1.9 back in March. So you can see way back in March, 1.9 now projections pretty much 4.5% lending rate. So with two meetings remaining in 2022, that indicates at least another one or more 75 basis points hike is in the in the future. So the negative reaction mostly, like I said, when I call it out, when the market's announcement is likely keyed in upon these forward looking comments that there are future hikes coming. And that's really what's upsetting folks. And the more softer kind of comment would have been, we're going to see how it goes. And, you know, Jerome Powell in the past has said we'll just have to see how it goes.

Merrit Strunk:
You know, he didn't say that. So this is a time for caution. How would you position this in your mind? It's a time for caution. I think this is an uncertain period of adjustment for the US economy, to be sure. But if folks take heart, we've seen this before, we've been there, we've seen it and we've emerged from it stronger than better than before. This is just cycle stuff. You know, the economies and countries go through cycles. Recessions happen all the time, market corrections happen all the time. This, too, we will progress through. Okay, so what can it do about this? That brings us to the five things you can do now in in the situation that we're presented with with the economy and the markets. And often we talk about smart review or smart inspection here on the broken nation here. So let's be smart about this. If you haven't had a moment where you stepped aside from your life and said, Let's review my current process and strategy here, get a check up on your financial situation. If you're especially if you're like 2 to 5 years of retirement, I would encourage you to have a conversation with a fiduciary financial advisor. Don't wait. Or you can call us at 8558521 9700 858521 9700. Or retirement unbroken dot com. Click that button. Get a free consultation or a complimentary consultation here. Can we all agree? I think we can. Matt, would you agree that information is power? Knowledge is power?

Producer:
Yeah, absolutely. I mean, that gives you the baseline for for making decisions and taking action.

Merrit Strunk:
And yet so many people are guilty and commit the sin of just not paying attention to money, financial stuff. And that's one of the most important things we've got going on in our in our lives here is as long as we're on the planet, we're going to need money. So I would say that being informed and or clear on what your situation is is a very, very good thing. It just can't argue against that. You know, any rational person would agree. Can I get clear on where we are now and where I'm going? And if I keep going in this way without a change, well, where will I end up if I keep proceeding as I am proceeding now in the certain situation that I have and the way that I've invested and the way that I am going, where will we end up if we don't change anything? Right. That becomes a basis for future financial decisions. And if you don't know and I will tell you, I've seen it from experience, folks, I meet with people every single day in our practice and the first thing we do is try to get clarity. So so clarity is the first step on understanding where if you have to make any changes, it could be like, you know what? You keep doing what you're doing, you'll be fine. Praise the Lord if you're in that situation, you know that that is like I'll be the first one to tell you you've got it going on. And that may put you in the situation. If you're if you think you're currently, you're like, no, I have it done. I did a good job. I've got enough assets. Then you're put in that situation where you need to ask yourself is, are you under the mantra that losses can hurt you more than gains can help you at this point in your life? I'll repeat that again.

Merrit Strunk:
Are you in that mantra, the the guiding statement here, that the losses could hurt you more than gains can help you. So, for instance, let me put some meat on the bone for that is if you have 100,000 and just, you know, increase it exponentially, let's just say a million. Then if you've got $1,000,000, if you lost 30%, would that hurt you more than if you had gained 25%? I think so. I think so. If you lost 30, 30% now, you have to change your whole mindset. I had $1,000,000. Now I have 750,000. Or I've got actually less than that then. Then you have to ask yourself that that would change your potentially your trajectory or your your actions and your expense rates and things like that. Then other than than if you had just gained more, 25% more, you know, I gained 250,000. Right. So you need to ask yourself these questions. One, get clarity to understand if you're in that situation, is there a change that needs to happen? You don't need to chase 30%, raise a return. You just need to to get a reasonable rate of return and avoid any large losses. And again, I can tell you, most people do not have clarity based on our experience. So ask yourself those good questions that we started with. And here are some here's some other ones. I'll just share them with you. What are some good questions to ask yourself? Do I understand what I'm invested in and why I am invested in it? Great question, right? What is it I'm invested in and why am I invested in them? The other one is in our lives.

Merrit Strunk:
If you're doing this right, we've got certain buckets of assets we've got at risk assets. We've got guaranteed income assets. We've got other assets. And what's the purpose of those buckets of money? And if you have no idea what I'm talking about, then you have got to contact somebody and get clarity. Right? Buckets. What do you mean, buckets? What do you mean? That each bucket of money has a purpose? Some buckets of money have purpose in terms of income and expenses. Some purpose and assets have medical cost in the future purpose. Some buckets of money have a purpose of emergency funds, things like that. So if you have no idea what I'm talking about or you're not there yet, have that conversation. Contact us, go to our website, Retirement Unbroken. Find out information, please, guys. Amongst many, many, many things. Knowing your purpose in life, having a connection to your Lord, knowing and getting a handle on your money and how it's going to come out for you is is really important here. So we're going to take a break right here. And they're going to come back with a couple of other important questions. And we're going to end up with what are the five things you need to be doing. All right. So join us back here right after the break. Go to retirement on broken dotcom, fill out the form there, press the button, have a complimentary, complimentary consultation. We don't bite. And I talked to everybody in person.

Producer:
This part of today's show, Your Retirement and Broken is available wherever you listen to podcasts and online at retirement. Unbroken dot com popcorn. Somebody's got some like some lucky shot.

Producer:
The Federal Reserve keeps raising interest rates to combat inflation, but how could it affect your retirement? I'm Matt McClure with the Retirement Radio Network, powered by Emera Life. Supply chain issues, the pandemic, energy prices and Russia's invasion of Ukraine have all been contributing factors to runaway inflation to fight rising prices. The Federal Reserve has been using one of its most powerful tools, raising interest rates.

Economics Professor:
So they started increasing the interest rates about, I guess, two meetings ago. So about three months ago when when they had the first increase of three quarters of a point percentage points to 75 basis points, which at that point was the largest increase in about 30 years.

Producer:
Tibor, besides, is an economics professor at Georgia Tech. He says it's surprising that the August reading for inflation did not see a decrease, especially given gas prices have been plummeting from recent astronomical highs.

Economics Professor:
Inflation is not going to stop all of a sudden, but what's one want is hoping for is that these increases start to decrease so that we start getting to levels that are sort of more manageable and more pleasing to the eye. If nothing else, it was very surprising.

Producer:
That's why, besides says many analysts now expect the Fed to be even more aggressive with interest rate hikes in coming months. So what does this mean for you? Potentially higher payments on mortgages, other loans and credit cards?

Economics Professor:
Securing any sort of balance on any loan that doesn't have a fixed interest rate? Is it going to become more expensive?

Producer:
Bassett ish says it's important for consumers to cut back where they can to lessen the blow of inflation and interest rate hikes. And if you're in the market for a new home, it could be good to delay the purchase until rates or home prices come back down. So how do the Fed's actions on interest rates affect your wallet? That's a key question to consider as higher costs eat away at your hard earned money with a retirement radio network powered by AmeriLife. I'm Matt McClure.

Producer:
You're listening to your retirement Unbroken. To schedule your free no obligation consultation with merit visit retirement unbroken.

Merrit Strunk:
All right. Welcome back. This is Merritt with the Retirement Unbroken show. And we'll welcome you back from the break here. And we just got through. We just started the what are the five things you can do now given what's all going on? We we just hit smart inspection, revisit your strategy, especially if you're close to retirement. If you don't have anybody to talk to or don't have anybody satisfactorily to talk to, then give us a call at 858521 9700. Or go to retirement unbroken dot com so good questions to ask yourself you know getting clarity and we we just hit a couple of questions here understand what you're in and why you're in it know what the purpose of the buckets of money that you do have. And here's the next one. Are you doing things as good as they can be done? And then how do you know? Right. I think that's a great question. And I think even if you're doing an excellent, excellent job and there are many, many, many of our our clients that we work with, who when we first met them, they seem to be doing a really good job. And but they were asking themselves this exact question, which is what do I don't know, what don't I know? And then how do I find that out? And then who do I talk to and am I doing things as good as I can do it? And for those folks who take that moment, break out of their lives, step aside and say, part of my role is CFO for my company or my family, or as chief financial officer of Insert Your Name.

Merrit Strunk:
Right? So am I doing things as well as they can be done? And then how do I know? One of the ways we do that, like I said, is to create absolute clarity. And we do it in a way that's very visual with our clients and they really appreciate it. We do it visually and we put it right in front. So it's amazing to see that when you have your whole financial life, whole cloth in front of you with everything that you need to know and then find out, well, what do I what is the better plan? Is there a better plan? What can I can I change? And to help the situation so that it would be a great question. Are you doing things as well as they can be done? And then how will how do you know and who do you talk to and how do you get that done? Easy way. Call us. We can help you. Okay. So the other one here, number two, in terms of the five things that things you can be doing right now is know your risk tolerance. You know, we talk a lot about risk tolerance and there's a psychological risk tolerance that people have that's in their head. And whether you're 20 or 30 is forties, 50, 6070s and even eighties, you have a a risk exposure to your investments and put it this way, exposed to market loss due to market volatility that if you were to go to sleep.

Merrit Strunk:
At night, you're not gnashing your teeth and waking up in a cold sweat, worrying about the market and how much you've lost. You've done the work to fix a quantitative risk tolerance number that's on your psychological risk tolerance to know that your plan is in alignment with that. You know what? I see the opposite of that. How do you know that you're at the opposite of that as you don't know your risk tolerance? And many people think their risk exposure is quite more less than what it actually is. Time and time and time again, we take a look at where they are and what the risk exposure is to market volatility and potential loss. And it's a lot more than they expect. And then son of a gun, you're in a conversation with somebody in there. Go, Hey, did you just experience a market loss in your investments due to what's happened? Say, like the S&P and S&P is down 19% year to date. Did you did you experience something similar to that? Well, yes, I did. Well, how much risk exposure do you think you have? Well, I thought I had much less than that. Did you have this reaction to your actually dollar amount going lower? Yes, I did. I can't believe I lost so much money. Okay. Just for clarity sake, you're experiencing 100% of the market downside and you are not expecting that because your psychological risk tolerance is less than that.

Merrit Strunk:
And that's the kind of conversations you should be having with your financial advisor. If you're not and if you don't have a financial advisor, you'd be having that conversation with yourself. Ask yourself, what is my risk tolerance? What am I comfortable with? If you're in your twenties, it's like Vegas sometimes. You know, some of these folks who have been investing for ten last ten years, they just thought money went up all the time. All the time. 20, 20 something, 25% gains every year. And the market for the last ten years, that's just what reality is. This is great. Why didn't I do this when I was ten years old? You know, it's just not in the cards. It's just that's not reality over history. It doesn't happen like that. And so we're experiencing that right now. All the people with the meme stocks and crypto, for goodness sakes, I've lost a ton in the market now. This is a real learning experience for a lot of people in terms of diversification and risk exposure and how to have a diversified portfolio on your on your goals. And like we said, know why you're doing what you're doing with the money in the assets that you have. Okay. So here's here's one. Number three, again, we're going to the five things that you can be doing now. Number three, for many investors, let's just say younger investors, as an example here, this may be a great time for bargain shopping, buying low and keeping with dollar cost averaging.

Merrit Strunk:
In essence, with dollar cost averaging, you pay yourself first and putting that money into your investments and it goes there automatically on a systematic basis that could be weekly, monthly, quarterly, and you make sure that money goes in. And essence dollar cost averaging is you're buying low, you're buying middle, you're buying high. But over over a period of time, your average price of entry is on average or lower. So if you're in that category where you're potentially a younger investor, you are planting the seeds of investment for the future and that's the way to grow wealth. You heard my equation earlier. If you were listening earlier, I said it's amount of money that you add to systematically at a average rate of return over a long period of time, and that equals wealth growth. So if you're in that category, dollar cost averaging, bargain shopping, buying low, that could be one of the things you consider doing at this point for our more conservative conservative listeners in The Unbroken Nation here. I've talked about this before and you may have missed the episode where we talked about, but tactically managed drawdown, target protection portfolios, that's a that's a mouth full of consonants and vows. Let me just repeat it for you again, tactically manage drawdown target protection portfolios and or tactically manage diversify our portfolios.

Merrit Strunk:
We use these as a part of a diversified plan for many folks who may be more conservative, where we might have a percentage of their assets deployed into these diversifier portfolios. And we do this precisely for tough times like this because that's more of the conservative or safer position money with less volatility. If you have no idea what I'm talking about, you may be in that category of folks who are in a passive investment portfolio, got a bunch of mutual funds. They just stay there. They don't change much at all. And I would call those, in my opinion, a slightly more, less evolved investment strategy or technique. And you owe it to yourself to find out if these type of portfolios are right for you. So. Tactically manage. Let me just define that a little bit more. Tactically managed would be on a frequent like for instance, daily basis, monitoring these portfolios on objectives and saying we only have this much risk. We're going to make an adjustment based on what we found out today. Every morning. We're found out today in in terms of the rate hike and where's the momentum going and how is the trend going and where is the market going? We're going to decrease the exposure here. And in essence, if you're a conservative listener to protect your wealth, because you may be in that situation where losses can hurt you more than gains can help you. So if you have no idea what that is, give us a call.

Merrit Strunk:
We'll educate you. We're happy to. So right now, these portfolios are in things like cash, high percentage gas, high percentage of cash. I have to use Mr. Lips and Mr. Tongue together many times to get a complete sentence out. Liquid alternatives and ultra short treasuries. You know, that's definitely safe, safer and more conservative positioning for portfolios when it's the right person with the right sort of conservative risk positioning. So that was a lot right there. That was number four. Number five is in essence, it's a mindset thing, which is stay disciplined, follow your plan, know why you're doing what you're doing when fear is high. We have the tendency as humans to to generalize the fear into everything. If you get back to I have a plan, I have timing, I know why I'm doing what I'm doing. I am clear why I'm invested in what I'm investing in. And we've done the best we can in terms of the planning process and testing it and stressing it to know that I'm as comfortable with this as I can possibly be, and the plan is right for you. So stay discipline, keep a long term perspective. This is a year I mean, here we are in September. You just call it a year. And over our life we have many, many years. Right. So this is just a year where we have a particularly trying economy and market and we are going to emerge from this as a country and be stronger.

Merrit Strunk:
So keep perspective, keep a long term perspective. Try not to be emotional. You know what the emotional investor does? I mean, we know this from our studies and we know that as the market goes up and it's peaking and it's going up, do it yourself. Investors go, you know what? I should get in there too. It's it's FOMO. Fear of missing out FOMO. Fear of missing out. I got to jump in there. Guess what? Market's already gone up. Now you jump in. Now it's time to do it. You're going to you're going to buy high and hope it goes higher. Right. And then when the market starts going down, here we are, we're going down. Then they go, I, I, you know, emotionally, I'm going to jump out here. I can't I can't lose anymore. Right. Because you don't know your risk tolerance. You don't know your plan. You're just just putting money into play. So now guess what you're doing. You bought high and now you're selling low instead of the reverse of buying low and selling high and locking in your gains. So try not to do any large moves or draconian, drastic moves and your investment process in response to these market fluctuations. Now, I say that, but if you're a conservative and you're older, you really need to have had this conversation with us before, beforehand so that we already put in place that if the market was to go down, you already know what was going to happen.

Merrit Strunk:
You already know the agreement that if the market goes down, this is what we've put in place already, it's going to happen. Ask yourself, what is your pre agreed upon strategy with your current financial advisor that if the market were to go down suddenly or or stay down, what's the plan of action one more time? What is the pre agreed upon strategy with your financial advisor? If the market was to go down what that plan of action would be? Most people, as many times as I've ever asked this, have said an answer to that question. There isn't one. We haven't had that conversation. There is no agreement. There is no pre agreement on something that is actually happening. Now, in reality, so much like Mr. Shoaf said to Jim Rohn, the great self improvement guy who sold you on that plan, that doesn't sound like a plan. Who sold you on that plan? Get one of those plans, get an agreement, create clarity, ask the right questions. I mean, all that a rational person could not disagree with what we've just gone through. A rational person could not say, wait a minute, get clear, get clarity, ask the right questions, get information. Knowledge is power. I can't really. Can you just disagree with that? I don't think you can. So we're going to go back to that quote that Matt, you shared with us, that that quote, what is a hope for the best for prepare for the worst? Isn't that right? Yeah.

Producer:
Expect the best. Prepare for the worst capital. Relies on what comes.

Merrit Strunk:
Yeah, thank you. Thank you. I agree. And I think that's just what we went through. We literally went through. Prepare for the worst by asking those right questions and things you can do. And I would encourage you to do that and have the mental mindset that you got to do it. Now you've got to take action. And then if you do, that's going to just it's going to pay off for you. Okay. We're going to take a quick break here. And then when we come back, we're going to talk to you about a Roth conversion and the tax benefits of doing it and some common misconceptions about Roth conversions. Joining us back here at retirement and Broken.

Producer:
You're listening to your retirement unbroken to schedule your complimentary consultation with merit visit retirement unbroken because I learned too much baby.

Economics Professor:
Why can't you see?

Producer:
Are you concerned about market volatility, rising taxes, economic uncertainty and how it all could affect your future in retirement? Then tune in to your retirement Unbroken with your host, Merritt Strunk, to learn how you can protect and grow your hard earned money, your retirement unbroken. Every Saturday at 1:00 pm, right here on FM 96.1 and AM 1170. The answer Protect your hard earned money today and schedule a free no obligation consultation now at retirement Unbroken CNN.com. This part of today's show, Your Retirement and Broken is available wherever you listen to podcasts and online at retirement unbroken dot com.

Merrit Strunk:
Hey, this is Merritt and welcome back to Retirement and Broken Radio Show and podcast. Now, we talked a lot about the things you can be doing right now. We talked about what's going on in our crazy geopolitical and the United States economy. And the stock market's one of those smart things that you can think about. We've called this Smart Taxation for Your Future is a conversation about taking your IRA funds and doing what's called a Roth IRA conversion. That's also called a backdoor conversion, which is most people, they work, they save money on their 41k, it's a traditional 401k and then when they change jobs, they roll that 401k out into a traditional 401 K, but then at some point in their lives no longer making W2, they're retiring. And now they have this gigantic tax timebomb on their hands, which is a deferred. Ira deferred. What's deferred about it? Your taxes are deferred, but at some point the government will be forcing you through what's called RMDs. Required minimum distributions to take money out that age now is 72. That was changed in the secure act, I believe it was moved from seven and a half back to 72. But then every time you take money out of that, you're taking it out of a bucket of money that has never been taxed before. So most people need to tap into that in retirement. It can happen a lot earlier than 72, but 72 is the latest that you can delay taking that money out.

Merrit Strunk:
But there are some common myths and misconceptions about a Roth IRA conversion. Now I want to encourage you. We are not tax advisors. We work in tax efficient strategies. And I want to tell you to consult your CPA on any of these things that you're thinking about doing here. So get some expert advice about it, because if you do it, there's taxes and that can hurt. All right. So myth number one here is that it takes years for a conversion to pay off. And we've seen elaborate mathematical support for the proposition that that if you're already retired or if you're within a few years of retirement, that it's unlikely you'll benefit from converting. So the reasoning is that it behind that misconception is that it will take years for tax free earnings inside of a Roth to match the tax bill, you have to pay going in. So when you do that conversion, you've got to pay your your current tax rate. Your current tax rate is going to be lower if you're no longer making W two. So that enters the conversation of should I do a backdoor conversion, thereby moving my never been taxable over money into a tax free forever bucket. That's the logic behind even having that conversation. And now the misconception is, well, it may take a long time for that Roth to build up and make it worth the money that I paid upfront on my taxes to make that seem logical.

Merrit Strunk:
After all, you know, it's likely that 100,000 IRA, if you were to convert the entire thing, would cost you 25,000 or more to convert. Right. But remember that tax bill on the conversion is the bill that you and or your heirs, if you don't do the conversion, it's your heirs that just received a taxable bucket of money that's never had taxes paid on it. So that tax bill in that conversion amount will have to pay someday. And so even if you stick with a traditional IRA, your heirs are going to have to pay it. So unless you're switching from Roth, which pushes it, can push you into a higher tax bracket for that period there, then you would be in with withdrawing taxable amounts from your traditional IRA. So then a conversion, you know, you'd have to do what's called a break even do a break even, and essentially you break even financially from day one. So if all else is equal, you're ahead of the game with a Roth starting on day two because tax free earnings are better than tax deferred earning. Would you agree? I'll just say that again. Tax free earnings are better than tax deferred earnings. But if you pay taxes on a conversion at a higher tax rate than you would have owed on a traditional IRA withdrawals. It does take time for tax free earnings to overcome that disadvantage.

Merrit Strunk:
So just how long depends on the difference in tax rates and the performance of your investments. So making the switch may not make sense for you. And that's why I would encourage you that if you're even in that situation where you can have that conversation. So. So seek help. Let's do the calculations. See if it works out for you and if it's right for you. Because it may not. Right. On some folks, it may make absolute sense to do it. And if your legacy minded, what a wonderful gift that you can pay off to your heirs and knowing that this money is coming to them tax free. Okay. Myth number two Reporting income from a conversion will wipe out any chance that your child will get college financial aid. So if if you're in that situation where you still have a younger child and they're getting ready to go to college, but you also have a tax deferred IRA, when you do a Roth conversion, it might make you look richer than you actually are. So just be sure that you you have that conversation with the College of Choice to be sure the college knows what's going on. If you are covered by Medicare, though, you may be in a bind. Your conversion, your conversion induced income. Right. As a result of your conversion that's now counting that conversion amount is income could spike the the push up into part B premium for the following year.

Merrit Strunk:
So you just need to do the calculation that you give me. Beware of that rather than not knowing that that could be a consequence. Beth. Number three, this is the the only year that you may be able to spread Roth conversion taxes over more than one year. I would say this is a CPA conversation. So you can you could definitely do what's called a strategic conversion, many people think is part of this. This myth here is that it's an all or nothing that's not true. So if you had $1,000,000 for one K, that went into $1,000,000 IRA and and you were thinking about a Roth conversion. It's not an all or nothing situation. You can take strategic conversion amounts over a period of time. So maybe we can do a certain amount over five years, a conversion every year for five years. Just remember that the sooner the money is in the Roth, the sooner the earnings are tax free rather than simply tax deferred. So I hope that makes sense. Strategic conversions, you don't have to do it all at one time so you can spread it over time. Myth number four After you convert, you can't touch the money for five years. And I love this this word here, it says, this is a canard. We're not talking about the species of bird, the canard. It's a canard where it's it's a bit of a goose chase. Right. So this grows out of a widespread misunderstanding of admittedly a convoluted way that Roth withdrawals are taxed.

Merrit Strunk:
So to withdraw earnings from a Roth tax rate, it's true the account the account must have been open at least for five years. And that's why I encourage many of our clients that we work with is to if you have the ability to get a Roth account opened, but then, you know, your your income is going to go pass the income threshold, which allows you to to have a Roth. At least you have that catcher's mitt open for future backdoor conversions. So, yes, before before you take money out of a Roth, the account must have been open for at least five years. So that's true. But the earnings in the wrath of the last thing to come out of the Roth. So the IRS assumes that the first money withdrawn comes from the annual contributions you made. And this money can't be tapped tax and penalty free at any time. Isn't that great? All right. So when you're doing that, it's not necessarily so. It's because they come out last, the earnings come out last. So only after you retrieve all your contributions and converted amounts do you touch the earnings. And if at the last five years of past the earnings are tax and penalty free or wonderful. So if you convert and it gives some math, you convert 100,000 today, you can withdraw it all tomorrow. Tax free. The 10% with early withdrawal penalty disappears once you reach 59 and a half.

Merrit Strunk:
And it's something else you've got to remember another age rule there or the account has been open for five years, whichever comes first. Okay, last last one. Myth number five and I'm going to wrap up here. You can't win if you pay the conversion tax with IRA money. Normally it's a lot better if you have outside funds, you convert and you pay the tax with the outside money you can use. Money's only on the inside of that. But, you know, it doesn't make conversion necessarily a bad deal. It's just a little more difficult to do that. So we encourage you to talk to your tax advisor on this. And I've got to tell you, this was a great show. It was our joy to bring you this information that you need right now. Right now, look, if you have lack of clarity, if you're confused on a couple of these concepts here, I think the best thing to do is get clarity, ask the right questions and talk to a fiduciary financial advisor. Go to retirement unbroken dot com. Our phone number is 858521 9700. Or just press the button there for a complimentary consultation. We look forward to meeting you. Go to the podcast, hit like hit subscribe and leave us a comment. We love to talk to our listeners. We'll see you back here next time. It's Saturday at 1:00 PM at 1170 AM and 96.1 FM.

Producer:
Thanks for listening to your retirement Unbroken. You deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard earned assets to schedule your complimentary no obligation consultation with merit. Visit retirement unbroken or pick up the phone and call 858521 9700. That's 858521 9700. Advisory services are offered through Momentum, Financial and Insurance Services LLC, an investment advisor in the State of California. Insurance products and services are offered through merit, strong and independent agent. California License number 075210. Certified Financial Fiduciary is a federally recognized professional certification.

Sonix is the world’s most advanced automated transcription, translation, and subtitling platform. Fast, accurate, and affordable.

Automatically convert your mp3 files to text (txt file), Microsoft Word (docx file), and SubRip Subtitle (srt file) in minutes.

Sonix has many features that you'd love including transcribe multiple languages, automated subtitles, enterprise-grade admin tools, powerful integrations and APIs, and easily transcribe your Zoom meetings. Try Sonix for free today.